Wednesday, September 28, 2011

Pigou's "Hours of Labour" and Chapman's

Although he provided only a perfunctory citation to S. J. Chapman, Pigou's analysis of the hours of labor followed closely five main points of the theory Chapman presented in 1909 in his presidential address to the Economics and Statistics section of the British Association for the Advancement of Science and subsequently published in the Economic Journal as "Hours of Labour."

In his article, Chapman referred to a mass of evidence from the 19th century indicating that reductions in the hours of work had not led to proportionate declines in output and, instead, had often led to increases. The reduction of hours allowed better rested workers to produce as much or more in shorter hours. Pigou inferred from the same evidence "that hours of labour in excess of what the best interests of the national dividend require have often in fact been worked. The reason for this is that "after a point, an addition to the hours of labour normally worked in any industry would, by wearing out the workpeople, ultimately lessen, rather than increase, the national dividend."

Both economists referred to the several complicating factors but arrived at the same conclusion regarding a hypothetical optimal length of working day. For Pigou, the "essential point" was that "in each several industry, for each class of workers there is some length of working day the overstepping of which will be disadvantageous to the national dividend." Similarly, Chapman had concluded that beyond a certain point, each additional hour of work would contribute to the output of the current day's total output but at the expense of the following (and subsequent) day's capacity for effort. The intensity of the work involved would dictate the point at which cumulative output would begin to decline and thus the length of the optimal working day.

The historical evidence would appear to contradict the expectation that self-interest would lead employers and employees to pursue an optimal working day, from each of their perspectives and to negotiate a compromise. Chapman's analysis explained why competition would tend to produce excessively long days. Workers would choose a day longer than was prudent for their welfare because the prospect of unemployment would cause them to give higher consideration to immediate earnings than to their long-term earning capacity. Similarly, because well-rested workers could be lured away by an offer of higher wages from another firm, employers could never be certain of benefiting from the short-term restraint that maintaining an optimal workweek would require.

Pigou explained the market failure as follows: "workpeople, in considering for what hours per day they will consent to work, often fail to take account of the damage that unduly long hours may do to their efficiency." In the case of employers, they "also often fail to realise that shorter hours would promote efficiency among their workpeople, and so would redound to their own interest." Furthermore, "except in firms which possess a practical monopoly in some department of industry, and so expect to retain the same hands permanently, the lack of durable connection between individual employers and their workpeople makes it to the employers' interest to work longer hours than are in the long run to the interest of production as a whole."

Insofar as Chapman's analysis of the hours of work was regarded as both novel and canonical (Hicks 1932, Marshall 1920, Robbins 1929), the conclusion is manifest that Pigou's presentation was essentially a recapitulation and that his scant attribution to Chapman en passant left much to be desired. This quibble over a footnote may seem at first an exercise in academic trivia except that Chapman's earlier scholarship on the Lancashire cotton industry also has an important bearing on the hours of work issue – one that links back to Henry Sidgwick's consideration of "the system of natural liberty considered in relation to production" in the second edition of his Principles of Political Economy (1887).

In 1932 John R. Hicks stipulated a condition for overcoming the type of market failure indicated in Chapman's theory and reiterated in part III of Pigou's Economics of Welfare. Hicks conjectured that a "very modest degree of rationality on the part of employers will thus lead them to reduce hours to the output optimum as soon as Trade Unionism has to be reckoned with at all seriously…" Hicks's proposition echoed views expressed by Henry Fawcett 60 years earlier in response to the Newcastle Engineers strike of 1871. It also resonates unexpectedly with Sidgwick's views on the utility of combinations in managing and preserving common pool resources.

Next: Sidgwick: Commons and Combination

Tuesday, September 27, 2011

The Supposed Reciprocal Nature of the Problem of Social Cost Reconsidered

Coase argued that the traditional approach to the problem of social cost "tended to obscure the nature of the choice to be made." He cited the question posed by that approach as "one in which A inflicts harm on B and what has to be decided is: how should we restrain A?" Coase objected that the problem was a reciprocal one and the real question was "should A be allowed to harm B or should B be allowed to harm A? The problem is to avoid the more serious harm." While such a restatement of the problem may be appropriate with regard to the externality problems discussed by Pigou in part II of Economics of Welfare, it entirely overlooks the radically different problem encountered in part III, in which A inflicts harm on both B and A and restraint of A may benefit both.

The determination of the hours of work provides a particularly intriguing example of a circumstance in which mutual benefit could result from an imposed restraint. In part III of Economics of Welfare, Pigou argued that "after a point, an addition to the hours of labor normally worked in any industry would, by wearing out the work people, ultimately lessen rather than increase the national dividend." Moreover, under competitive conditions, employers would tend to prefer hours of work the exceeded the optimum for output. Pigou viewed market failure with respect to the hours of work as commonplace, observing that, "the evidence is fairly conclusive that hours of labour in excess of what the best interests of the national dividend require have often in fact been worked" (Economics of Welfare Part III, Chapter VII, "The Hours of Labour" page 465).

Next: part III. Pigou's "Hours of Labour" and Chapman's

Monday, September 26, 2011

The Problem with the Problem of Social Cost, part I: The Problem Examined and the Problem Not Examined

Ronald Coase's "The Problem of Social Cost"(1960) was "concerned with those actions of business firms which have harmful effects on others." The standard examples Coase examined and the economic analysis he challenged were taken ultimately from Pigou's treatment in the Economics of Welfare (1920). It was Coase's contention that the suggested courses of action in the Pigouvian tradition – liability, taxation or regulation – were inappropriate and often not desirable.

Coase didn't consider the full range of Pigou's examples and analysis, however. His focus on so-called externalities – what Pigou referred to, in part II of Economics of Welfare, as incidental uncharged disservices or uncompensated services – responded to the version of neoclassical welfare economics that prevailed in the 1950s but it omitted consideration of the Institutionalist legacy derived from Pigou's discussion of "The National Dividend and Labour" in part III of the Economics of Welfare. Donald Stabile (1995, 1996) has argued that it was this focus on working conditions and welfare that profoundly influenced American Institutionalist economist, John Maurice Clark, in his analysis of the social overhead costs of labor.

Next: part II. The Supposed Reciprocal Nature of the Problem Reconsidered

Monday, September 19, 2011

Professional Ethics

Joseph Heath, Business Ethics Without Stakeholders:
"...many engineers in Canada wear an iron ring on their little finger, which is conferred during a ceremony called “The Ritual of the Calling of an Engineer” (developed in 1925 by Rudyard Kipling). The ring is a symbol of the Pont de Québec Bridge, which collapsed in 1907 as it was nearing completion, killing seventy-six people. A subsequent Royal Commission declared that errors committed by the bridge’s principal engineers were the primary cause of the tragedy. Initially, the rings were said to have been made with iron from the collapsed bridge. In the present day, the rings are intended simply to serve as a reminder to working engineers that the lives of many people depend upon their efforts. Engineers have more than just an obligation to put in a day’s work for a day’s pay, they must also consider the impact that their actions will have upon the eventual users of the structures or products they design. Many engineering students describe the ceremony as genuinely moving, and find that the ring serves as a constant reminder of their professional ethical obligations."

Lawrence Katz
Autor and Katz, "Grand challenges in the study of employment and technological change: A white paper prepared for the National Science Foundation":
"Leading economists from Paul Samuelson to Paul Krugman have labored to allay the fear that technological advances may reduce overall employment, causing mass unemployment as workers are displaced by machines. This ‘lump of labor fallacy’—positing that there is a fixed amount of work to be done so that increased labor productivity reduces employment —is intuitively appealing and demonstrably false. Technological improvements create new products and services, shifting workers from older to newer activities. Higher productivity raises incomes, increasing demand for labor throughout the economy. Hence, in the long run technological progress affects the composition of jobs not the number of jobs."
David Autor

Joseph Heath:
"The existence of a professional association, a certification system, a common body of accepted knowledge, and a shared ethics code, are sometimes treated as the distinguishing marks of a genuine profession. This involves some confusion of cause and effect. What makes the complex body of knowledge important is that it generates an information asymmetry, which creates a moral hazard problem that threatens to undermine any market transaction involving such specialists. Thus specialists must work hard to cultivate trust among potential purchasers of their services. A certification system, along with a professional association that imposes a stringent code of conduct, is one way of achieving this objective."

Charles Ferguson, writer and director of Inside Job:
"Indeed, one of the most disturbing things I learned in making Inside Job, an issue discussed in the film, is that US universities do not require disclosure of financial conflicts of interest by faculty members, place no limits on the sources and size of professors’ outside income, and do not collect information on the size of this income. The only reason we now know of Prof Mishkin’s payment for the Iceland report is that he was later forced to disclose it when he was appointed to the US Federal Reserve Board.

These failings would be unimportant if they were isolated and unrepresentative, and I have no desire to destroy Prof Mishkin. Unfortunately, however, these failings are not isolated, and that is the important message.

Over the past 30 years, the economics discipline has been systematically subverted, in much the same way as American politics – by money, especially from the financial services industry. Many of the most prominent economists in America are now paid to testify in Congress, to serve on boards of directors, testify in antitrust cases and regulatory proceedings, and to give speeches to the companies and industries they study and write about with supposed objectivity. This is not a marginal activity; it is now an industry, run by a half dozen large companies.

Some prominent academics have close ties to financial services yet neither their university employers nor the journals in which they publish require them to disclose their conflicts of interest, their financial positions, or the relationship between their financial interests and the policy positions they take."

Sunday, September 18, 2011

David Autor and Lawrence Katz are Idiots

In a paper prepared for the National Science Foundation, MIT and NBER economist David H. Autor and Harvard and NBER economist Lawrence F. Katz wrote:
Leading economists from Paul Samuelson to Paul Krugman have labored to allay the fear that technological advances may reduce overall employment, causing mass unemployment as workers are displaced by machines. This ‘lump of labor fallacy’—positing that there is a fixed amount of work to be done so that increased labor productivity reduces employment —is intuitively appealing and demonstrably false. Technological improvements create new products and services, shifting workers from older to newer activities. Higher productivity raises incomes, increasing demand for labor throughout the economy. Hence, in the long run technological progress affects the composition of jobs not the number of jobs.

First of all, Samuelson and Krugman didn't "labor to allay the fear." They spouted canned nonsense that was disavowed by "leading economists" nearly a century ago. Back in May I wrote Professor Krugman an open letter (hard copy sent by mail) detailing the discrepancies in the lump of labor fallacy claim and asking him to at least respond to the evidence I presented. Krugman did not reply.

I will, of course, forward copies of that open letter to Professors Autor and Katz -- with no great expectations.

Saturday, September 17, 2011

Politics Imitates Satire

Something is rotten in Denmark:
The government and opposition have presented their different plans to solve Denmark’s economic problems. All agree the level of debt and an ageing population spells a need to save billions in public expenditure. The political parties also agree that the Danish must work more. But they differ on how this will be achieved. The government’s 2020-plan sees the abolition of an early retirement scheme (‘efterløn’) which means Danes will retire later, while the Social Democrats and the Socialist People’s Party (SF) want everybody to work 12 minutes longer days. The 12 minutes will be found and agreed upon by the social partners, so exactly how this would work is yet not known. As a result, the government has been keen to describe the opposition’s plan as ‘diffuse‘.

Friday, September 16, 2011

A New View of Work

At The Daly News, Christian Williams writes:
Many of us have been raised according to the "Protestant work ethic." That is to say, we were encouraged to work hard and thus become a successful and productive member of society. But what if this advice is wrong? As the economy reaches and breaches the limits to growth, working long hours causes market failures, giving weight to the idea that governments should intervene to reduce average working hours.

In the "empty world" of the past, hard work was a public good with few negative externalities on society. In today’s "full world," work has become a common-pool resource, vulnerable to over-exploitation. In the absence of social or cultural norms to take care of this common-pool resource, governmental intervention is the best option for preventing market failure and encouraging an optimal amount of work. Unfortunately, our work ethic is worsening the situation.


This is a very welcome analysis by Christian Williams and I hope people pay close attention to it. I hope that it also will open dialogue about several of the points that Christian raises. I want to address three of the issues briefly here and refer readers to a longer paper and book manuscript that discuss these matters in more detail.

First, I am delighted that Christian refers to work as a 'common-pool resource.' I put forward the proposition of work as a common-pool resource, following Elinor Ostrom’s analysis, two years ago in the manuscript, Jobs Liberty and the Bottom Line. I would argue that work not only has become a common-pool resource but has always had such characteristics and that movements in the past for shorter hours have tacitly addressed work as a commons. I elaborate on this theme in a paper, abstracted from my manuscript, "Time on the Ledger: Social Accounting for the Good Society."

Arising out of viewing work as a common-pool resource is my disagreement with Christian’s prescription for government intervention to limit the hours of work. I’m not opposed to some government incentives to facilitate work time reduction but I want to suggest that the impetus for regulation and enforcement needs to come from the grass roots. In her case study analysis of common-pool resource management, Ostrom found that well-managed locally-based organizations of the resource users were more effective in managing such resources than remote, technocratic agencies. The reason for this is that the resource users (in this case it would be workers) had more at stake in making sure that rules were enforced and resource protected. I have discussed institutional arrangements in my manuscript and in the article mentioned above.

My third point may be mainly a matter of syntax but it highlights an important issue. Christian writes, "working long hours causes market failure" and that in the past hard work had "few negative externalities." My disagreement is that, technically speaking, it is an inherent market failure that leads to excessive hours of work, not the other way around. Sydney J. Chapman formalized the theory of the hours of labor in 1909 and his conclusions pointed to the tendency in a competitive market for both employers and employees to 'prefer' hours that were too long from the standpoint of output (employers) and worker welfare (employees). This perverse preference is driven by competitive pressures. As this inherent tendency has always been a feature of wage work, its 'negative externalities' have also always been pervasive (although the term 'externality' is a bit of a misnomer as the negative effect does not just fall on some third party).

I am currently investigating the history of economic thought regarding market failure and externalities and would welcome dialogue with others who are interested in the topic.

Sunday, September 11, 2011

"Infrastructure has another meaning, too."

Arlene Goldbard points out in her essay, "Tell The Story Right: The Jobs Plan We Need," the not-so-obvious to those whose "misplaced concreteness" makes them see only roads and bridges where public support of culture -- books, plays, paintings, sculpture, dance performance, concerts and cultural workshops -- would employ far more people, more creatively with less capital intensity.
Cultural infrastructure, social infrastructure: these describe the institutions, customs, ways of communicating, expressions of caring, celebrations, ceremonies, and public spaces that enable people to feel seen and to know they are welcome in their own communities. Cultural infrastructure is the aggregate of innumerable public and private actions, of many threads weaving the social fabric we share. When it becomes badly frayed—when foreclosures, homelessness, long-term joblessness are epidemic, when countless families are forced to relocate to find work, when bleeding-edge gentrification become commonplace, when scapegoating rises and ordinary Americans are unable or unwilling to cross lines of color or class—when the social fabric is as shredded as it has become after decades of me-first corporate-driven politics, mending it is clearly a public sector responsibility. Who else’s should it be?

Three-quarters of a century ago, President Franklin Delano Roosevelt’s New Deal drove public-sector interventions that helped to pull us out of the Great Depression. Roads and bridges, parks and ampitheatres were built, to be sure. But the largest single New Deal intervention was Federal One, comprising five massive cultural programs that put jobless Americans to work. They made plays that helped us face the issues we had to resolve and images that reminded people of a history of struggle and cooperation that built their communities. They created enterprises that brought exciting innovative design into the public sphere; taught children to make music so that access to beauty and meaning did not become an attribute of privilege, but was recognized as a human right; and preserved living history as a reservoir of resilience we could draw on to face the future.

FDR understood that shoring up physical infrastructure wouldn’t save us without comparable investment in cultural infrastructure. People wouldn’t have faith in the future, they wouldn’t be willing to spend their hard-earned dollars, they wouldn’t be aligned with national goals for recovery, unless they had meaningful, personal connections to our collective story. Unless they felt connected and saw their own actions as helping. Demonstrably, he was right.

Friday, September 9, 2011

Dean Baker Statement on the American Jobs Act and Work Sharing

For Immediate Release: September 8, 2011
Contact: Alan Barber, 571-306-2526

Washington, D.C.- Following the President's address to Congress and the announcement of the American Jobs Act, CEPR Co-Director Dean Baker released the following statement:

"It is encouraging to hear that President Obama included work sharing as part of his jobs agenda. This is a job creation measure that both has been shown to be successful and has the potential to break through partisan gridlock.

"The basic logic of work sharing is simple. Currently the government effectively pays for workers to be unemployed with unemployment insurance. Rather than just paying workers who have lost their job, work sharing allows workers to be partially compensated for shorter work hours. Instead of one worker getting half pay after losing her job, under work sharing five workers may get 10 percent of their pay cut after their hours are cut by 20 percent.

"This situation is likely to be better for both employees and employers. It allows workers to maintain their jobs and continue to upgrade their skills. It avoids a situation where workers may end up as long-term unemployed and find it difficult to get re-employed.

"This is also likely to be better from the standpoint of employers since it keeps trained workers on the job. When demand picks up, they don’t need to find and train new workers, they simply must increase hours for their existing work force.

"This approach has been a proven success in many countries, most importantly Germany. The unemployment rate in Germany is half of a percentage point below its pre-recession level even though its growth has been no better than in the United States. If a work sharing program here in the United States can reduce dismissals and layoffs by just 10 percent, it would generate the equivalent of 2.4 million new jobs a year.

"As a new approach, this plan may also get around Republican opposition. Work sharing has drawn support across the political spectrum. AEI economist Kevin Hassett, who was Senator McCain’s chief economist in his 2000 campaign, has been a vocal proponent of work sharing. The policy in Germany is fervently embraced by Germany’s conservative government.

"It is encouraging that President Obama was willing to step outside the box and try a new approach. If the Republicans cooperate, this policy could make a big difference to millions of workers and their families."

Work Sharing in the Long-version Fact Sheet for the American Jobs Act (see p.11)

Thursday, September 8, 2011

Work Sharing in White House Fact Sheet and Overview

Dean Baker tweeted that work-sharing was in the White House Fact Sheet (thanks to hapa for the tip):
Work Sharing: UI reform to prevent layoffs. Preventing layoffs in the first place is a win-win for workers and businesses. The President’s plan – consistent with proposals championed by leaders like Sen. Jack Reed (D-RI) – calls for work sharing that would let workers receive pro-rated UI benefits as compensation for a reduction in hours at businesses that would otherwise lay workers off.

Work sharing programs currently operate in about 20 states.
According to an OECD paper, during the recession, work-sharing programs in Germany, Italy, and Japan reduced the drop in employment from 2008 to 2009 by between 0.5 and 1 percentage points.

Dean Baker (the co-director of the Center for Economic and Policy Research) and Kevin Hassett (Director of Economic Policy Studies at the American Enterprise Institute) wrote that “work sharing could work for us… there is one [policy] that clearly dominates in terms of impact and cost-effectiveness: work-sharing.” (April 5, 2010).

UPDATE: Below is the reference in the American Jobs Act Fact Sheet (pdf):

• The most innovative reform to the unemployment insurance program in 40 years: As part of an extension of unemployment insurance to prevent 5 million Americans looking for work from losing their benefits, the President’s plan includes innovative work-based reforms to prevent layoffs and give states greater flexibility to use UI funds to best support job-seekers, including:
› Work-Sharing: UI for workers whose employers choose work-sharing over layoffs.
› A new “Bridge to Work” program: The plan builds on and improves innovative state programs where those displaced take temporary, voluntary work or pursue on-the-job training.
› Innovative entrepreneurship and wage insurance programs: States will also be empowered to implement wage insurance to help reemploy older workers and programs that make it easier for unemployed workers to start their own businesses.
• A $4,000 tax credit to employers for hiring long-term unemployed workers.
• Prohibiting employers from discriminating against unemployed workers when hiring.
• Expanding job opportunities for low-income youth and adults through a fund for successful approaches for subsidized employment, innovative training programs and summer/year-round jobs
for youth.

Matthew Bishop is an Idiot.

Matthew Bishop writes in The Economist:
It is tempting to think of the globalisation of the labour market as a zero-sum game in which Mrs Kamal in Pakistan is benefiting at the direct expense of Ms Vetter in America. But economists point out that such calculations suffer from the “lump of labour fallacy”—the belief that there is only a fixed amount of work to go round. A better explanation, they say, is the theory of comparative advantage, one of the least controversial ideas in economics, which suggests that free markets make the world better off because everyone can concentrate on doing what they are best at.

All the same, a global labour market will not make every individual in the world better off: there will be losers as well as winners, and they may put up stiff resistance to change if the losses prove too painful.

So, if there are "losers", where is the "fallacy"? In Matthew Bishop's pants?

The Black Hole of Social Costs: "In the Best Interest of the National Dividend"

The standard term in economics for the bad stuff industrial activity does to the environment is "negative externalities." The term implies that the bad stuff is a side effect, an appendix, a byproduct, an afterthought -- something outside or on the fringe of the main business of production and exchange.

The neoclassical economic concept of externalities comes from Cecil Pigou, successor to Alfred Marshall's chair at Cambridge. His term for the concept, in Economics of Welfare, was not externality but "incidental uncharged disservice." John Maurice Clark in the 1920s and K. William Kapp in 1950 expanded on Pigou's analysis of what they referred to as social overhead costs or just plain social costs.

But what if those social costs were neither "incidental" nor "external" to the main processes of production and exchange after all? What if they are at the very heart of the system? The clue for this startling reversal of field in economics can be found in Pigou's Economics of Welfare (1920). Chapter 7 of Part III of that book discusses the hours of labour. Although Pigou begrudged one perfunctory footnote to Sydney Chapman's "Hours of Labour," anyone familiar with that 1909 Economic Journal article should recognize that Pigou's discussion was essentially a summary of the implications of Chapman's theory.

I have long suspected that the Pigouvian concept of externality owed a tremendous intellectual debt to Chapman's analysis of market failure in the determination of the hours of work. A few days ago, while searching for evidence of the link, I came across what may be the smoking gun: two sentences in Economics of Welfare that both refer to deviation from the amount of resources required "in the best interest of the national dividend":
1. "In any industry, where there is reason to believe that the free play of self-interest will cause an amount of resources to be invested different from the amount that is required in the best interest of the national dividend, there is a prima facie case for public intervention.” (page 331)

2. "In spite, however, of these and other difficulties [in analyzing the matter], the evidence is fairly conclusive that hours of labour in excess of what the best interests of the national dividend require have often in fact been worked." (page 465)
The problem Pigou identified of using an amount of resources that deviates from what is "in the best interest of the national dividend" is not just an ethical one but a fundamental economic one. The ability to shift costs of production to a third party, or a worker, not only leads to an unjust distribution of the fruits of industry but creates perverse incentives for the progressively worsening misallocation of resources. Those who have the power to shift their costs obtain the wherewithal to uphold and extend their privilege.

Waste becomes the foundation of an illusory "prosperity." Moreover, the waste is not peripheral to the system of production and distribution but originates in the most central relationship of work and wages. I have today uploaded a revised version of Time on the Ledger, which further explores the implications of a Copernican turn in which social costs appear not as satellite "externalities" but as the sun around which supply, demand and price revolve.

Wednesday, September 7, 2011

The End of Loser Liberalism

Dean Baker, from chapter six:
Work sharing is not a new idea. The idea of shortening work time to create more jobs has a long history. In the context of an economy that is at full employment, the approach might be misguided, since legislated reductions in work time can lead to increased inflationary pressure and economic distortions. However, in an economy that is operating well below its potential and that is projected to remain below potential output for much of the next decade, as is the case with the U.S. economy, work sharing may be the most viable way of bringing the nation back to full employment.

Less Work, More Living

Juliet Schor in Yes Magazine:
Imagining a world in which jobs take up much less of our time may seem utopian, especially now, when a scarcity mentality dominates the economic conversation. People who are employed often find it difficult to scale back their jobs. Costs of medical care, education, and child care are rising. It may be hard to find new sources of income when U.S. companies have been laying people off at a dizzying rate.

But fewer work hours for people with jobs is a key step toward solving the unemployment crisis—while giving Americans healthier lives. Fewer hours means more jobs are available to people who need them. Living on less pay usually means consuming less, making more of the things one needs at home, and living lighter, whether by design or by accident.

Today, driven both by necessity and the deliberate choice to live simply, more Americans are shifting toward fewer work hours. It’s a trend that, if done correctly, could get us out of our current economic crisis and away from unsustainable economic growth.

Saturday, September 3, 2011

When a Fallacy Ceases to be a Fallacy

"And the broken windows fallacy ceases to be a fallacy..." -- Paul Krugman, Sept. 3, 2011

Indeed. But let's take this an important step further. A fallacy that ceases to be a fallacy couldn't have been a fallacy in the first place. It was only an empirical proposition whose parameters didn't fit the then current conditions. Facts change and the discerning change their minds. Please, Professor Krugman, please, weigh in with your mind change on the lump-of-labor "fallacy" now that the amount of work to be done appears, for all intents and purposes, to be a "fixed quantity."

In 1993, you wrote:

"Economists call it the "lump of labor fallacy." It's the idea that there is a fixed amount of work to be done in the world, so any increase in the amount each worker can produce reduces the number of available jobs. (A famous example: those dire warnings in the 1950's that automation would lead to mass unemployment.) As the derisive name suggests, it's an idea economists view with contempt, yet the fallacy makes a comeback whenever the economy is sluggish."

Back in May, I sent you an open letter (by snail mail) challenging each component of this fallacy claim with historical documentation. You haven't replied.

There have been 1702 page views of that letter on my blog. When the lump of labor fallacy ceases to be fallacy, don't you think you should change your mind?

Friday, September 2, 2011

Nothing From Nothing Leaves Nothing

"I'm not trying to be your hero. 'Cause that ZERO is too cold for me." Q. How many economists and politicians does it take to screw in a lightbulb?
I can't get no satisfaction.
I can't get no satisfaction.
Cause I tried and I tried and I tried, yeah, and I tried.